SOLE PROPRIETORSHIP: This is a type of business with one owner. The business may not even need to be registered with the state as long as they are “doing business” as themselves. It is a very easy to start up a sole proprietorship, and more often than not it does not require a great deal of money. Another advantage is that the profits go straight to the sole proprietor who doesn’t need to worry about sharing or dealing with another individual or entity on the day to day operations as well as money. A major disadvantage would be the unlimited liability that is involved for sole proprietors. Creditors may come after person possessions to compensate for the business failures. It is also very difficult to secure additional capital from a bank. This is due in part to banks using ratios that involve not only the business debts, but also the personal debts of the sole proprietor.
• Liability: The liability for a sole proprietorship is unlimited not only on the business assets but also on the personal assets. While it is true that all profits will be used how the sole proprietor deems fit. It is a false since of entitlement. It will be very difficult for the owner to increase their future earning power due to loans, debts and everything tied to the owner personally. • Income Taxes: A sole proprietorship claims their income taxes on their personal tax return. The advantages to doing this are paying no double tax and the ability to deduct losses and expenses on their taxes. The disadvantages are that it is possible for the business income to “throw” a person or joint spouse into the higher income range resulting in paying a higher tax rate. • Longevity or continuity of the organization:
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